Downer told of Iraq dealsCaroline OveringtonJanuary 18,...

Downer told of Iraq deals
Caroline Overington
January 18, 2006
ALEXANDER Downer has been dragged into the wheat board scandal after the chief executive of AWB told a corruption inquiry he had discussed the Iraq deals with the Foreign Minister on a "number of occasions".

Andrew Lindberg also told the Cole inquiry he had met Mr Downer after AWB was accused of deliberately inflating prices in its wheat contracts to fund the illegal kickbacks.

John Howard's desire to protect his Government from the corruption allegations in the UN oil-for-food program have failed spectacularly. The inquiry's senior counsel John Agius QC revealed officials from the Department of Foreign Affairs and Trade had already been interviewed.

In opening remarks on the second day of the inquiry, Mr Agius assured commissioner Terence Cole that officials had been "investigating DFAT's role since the inquiry was announced last November".

"Evidence in relation to those investigations will be called in the course of the hearings," he said.

The role played by Mr Downer may also be investigated.

The Prime Minister commissioned the Cole inquiry after a UN report into the corrupt program revealed that AWB, Australia's monopoly wheat exporter, was the largest single supplier of illicit funds to the Iraq regime.

He drew the terms of reference tightly so that only the role played by the three private companies mentioned in the UN's Volcker report -- and not the Government -- would be investigated.

Mr Agius asked Mr Lindberg, during seven hours of testimony, whether he had met Mr Downer. "Mr Lindberg, did you not meet with Minister Downer on the very issue of the allegations that were being made about AWB's contractual relationship with the IGB (Iraqi Grains Board)?"

Mr Lindberg replied: "I met with Minister Downer on a number of occasions but not specifically. I mean the questions of our business in Iraq may have been discussed but not specifically about individual contracts."

It was revealed last year that DFAT officials had accompanied AWB executives on trips to Iraq, and that DFAT officials had given the company approval to pay "trucking fees" to a Jordanian company called Alia, which funnelled the money back to Saddam Hussein's regime.

AWB's wheat contracts, worth more than $1.5 billion, were approved by Australia's UN mission in New York.

Mr Agius made it clear yesterday that all relevant witnesses, including those from Canberra, would be interviewed.

Mr Lindberg -- who earns more than $800,000 a year as managing director of AWB -- admitted the company had deceived the UN about its dealings with Iraq.

He also admitted that AWB had inflated the price of at least one contract for wheat that was drawn up under the UN's oil-for-food program.

But he said he had known about these things only after they occurred.

Faced with a blizzard of documentary evidence that AWB employees had known they were involved in "sanction-busting activities", Mr Lindberg said "I don't know" and "I don't recall" more than a dozen times, prompting Mr Agius to ask: "What did you know?"

"I knew nothing," Mr Lindberg replied, to guffaws from the public gallery.

Mr Lindberg was shown a memo, which bore his signature, that showed the Iraqis wanted AWB to inflate the prices of at least one of the 41 UN wheat contracts so an old debt to a company called Tigris Petroleum could be paid.

Mr Lindberg said he could not remember seeing the document.

"I may have read it," he said. "I can't recall. I don't know."

"Mr Lindberg, there's no doubt that you read it, is there? Your initials are on it," Mr Agius said.

Mr Agius made the point that such a plan, if implemented, would "clearly have been a breach of the UN sanctions, would it not?"

"I don't know," Mr Lindberg said.

Mr Agius asked Mr Lindberg to study an AWB report from February 2001 that openly discussed the "transport fees and the fact that the money was going not to Alia, but directly to Iraq".

"The trucking fee is now $US25," it said, adding: "We believe the increase in trucking fee and addition of the service charge is a mechanism of extracting more dollars from (the UN's oil-for-food account)."

Mr Lindberg said he had never seen the report, which apparently was prepared for him.

He said he was aware of media reports in 2003 containing allegations that AWB might have inflated its contracts to disguise illegal payments to Saddam's regime. He asked the company's general counsel, Jim Cooper, to conduct a review and was satisfied when it found no evidence of wrongdoing. Mr Lindberg said the commission should not conclude that he read every memo, or opened every email, he received.

The Cole inquiry is expect to run for four weeks, and will continue today, with former chairman Trevor Flugge expected to give evidence.

On the stock market, investors have begun to sell AWB shares after two days of damaging evidence at the inquiry.

Shares have plunged 5.5 per cent in the past two days, yesterday sliding another 16c to $6.02, with analysts saying the inquiry was undermining confidence in the company.

The stock had proved remarkably resilient through the UN scandal, rising 14 per cent in the 2 1/2 months since the scale of AWB's involvement was revealed in the Volcker report.